BUS 626 week1 D1

Define capitalism and socialism and provide examples of countries for both structures.
Next, discuss why capitalism and socialism are currently being spotlighted in U.S. politics giving the pros and cons to each organizational structure. Be sure to be specific and give supporting facts, not just opinions.
Finally, address the question: Does capitalism create wealth inequality and is this necessarily a bad outcome?
Support your response with at least one scholarly and/or credible resource

According to Little (2016), socialism is an economic system in which the government owns goods and their production to share and distribute wealth equally among the members of the society. In other words, everything people produce in a socialist system is a social product, with everyone involved in its production entitled to its sale or use. Examples of countries with socialist structures include Sweden, China, North Korea, and Cuba. Little defines capitalism as an economic system with private ownership of capital, the sale of commodities in the open market, and payment of wages for labor to generate profit and accumulate wealth. The United States is an example of a capitalist country because the means of production are privately owned and operated for profit.

Socialism and capitalism are popular topics in the U.S as some groups argue that the country should adopt socialism to spur social progress and equity while others critic this structure. Some politicians, such as Senator Bernie Sanders and Rep. Alexandria Ocasio-Cortez promote socialist policies, whereas the current Vice President Kamala Harris and former President Trump promote capitalism.


  • Pros: The incentive to earn more profits encourages innovation. Consequently, corporations focus on efficiency, which prevents the creation of bureaucratic governments.
  • Cons: Companies might leverage their power to exploit citizens, and others enjoying substantial monopsony power could take advantage of workers by paying low wages.


  • Pros: It promotes equality in society, reduces poverty, and promotes social welfare among citizens.
  • Cons: More taxes may discourage investing and working, businesses may relocate to other nations with better tax regulations, and it could lead to unemployment because of unnecessary labor regulations.

Capitalism creates wealth inequality, as shown by various studies (Bourreaux, 2002; McCain, 2017; Stiglitz, 2015). Some sources of this inequality include the disparities in individual talent, skills, and opportunities from individuals’ backgrounds, such as inheritance. As a result, the gap widens, resulting in differences in education, economic power, and higher income inequalities. Hodgson (2014) identifies another crucial cause of wealth inequality in capitalist systems. He notes, “The capitalist can use her assets as collateral and borrow more money to invest in further ventures, hence getting a double usage out of these assets. In contrast, the worker cannot use her labor power as collateral (p. 19).” Therefore, capital itself is another source of wealth and income inequality in capitalism. It is a bad outcome because it promotes inequality of opportunities caused by differences in circumstances beyond an individual’s control, such as the location of birth and family background. These disparities can undermine individuals” educational and occupational choices. As individuals divert their efforts towards securing favored treatment and protection, the cases of corruption and nepotism increase.


Bourreaux, D. (2002). Equality and capitalism. Ideas on Liberty52(9), 52-53.

Hodgson, G. M. (2014). What is capital? Economists and sociologists have changed its meaning: should it be changed back? Cambridge Journal of Economics, 38(5), 1063–1086. https://doi.org/10.1093/cje/beu013

Little, W. (2016). Work and the Economy. Introduction to Sociology-2nd Canadian Edition.

McCain, R. A. (2017). The future of capitalism: What Can Be Done About Wealth Inequality?. In Approaching Equality. Edward Elgar Publishing.

Stiglitz, J. E. (2015). The origins of inequality, and policies to contain it. National Tax Journal68(2), 425-448.

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